What happens to the shares in a private company of a shareholder who dies?
On death, title to shares transfers automatically to the shareholder’s executors (or administrators where there is no will). However in order for the executors to transfer them to someone else whether by way of gift under the will or by selling them to realise their value, any such transfer must comply with the transfer provisions and restrictions (if any) contained in the company’s articles of association.
It is quite usual for private company articles to provide that before shares can be transferred to a new shareholder, they must first be offered to the other shareholders. Similarly, there may well be provisions dealing with what happens on the death of a shareholder and requiring that the deceased shareholder’s share must be offered to the other shareholders at a defined value.
Finally in order to prove title to the shares, the executors or administrators will need to produce the grant of probate, which establishes their title to the shares.